DEMOCRACY  AND 
BUSINESS 

ADDRESS  BY 

J.  LAURENCE  LAUGHLIN 

PROFESSOR  OF  POLITICAL  ECONOMY 
UNIVERSITY  OF  CHICAGO 

DELIVERED  AT  THE 

NINETEENTH  ANNUAL 
MEETING 

OF  THE 

CENTRAL  SUPPLY 
ASSOCIATION 


HELD  AT  THE 

HOTEL  SHERMAN,  CHICAGO 
OCTOBER  22,  1913 


u"5  £ cU 


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<£ 

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ADDRESS 

by 

PROFESSOR  J.  LAURENCE  LAUGHLIN 


Mr.  President  and  Gentlemen  of  the  Central  Supply 
Association : 

I can  see  a certain  fitness  in  asking  me  as  an  economist 
to  come  here  with  the  avowed  intention  of  fitting  demand  to 
supply,  but  the  tremendous  impetus  that  you  have  given  to 
supply  is  something  that  I shall  not  hope  to  overtake  by  aca- 
demic discussion  of  the  demand.  There  are,  however,  gentle- 
men, some  very  serious  and  grave  questions  lying  before  you 
as  business  men  in  particular,  and  before  the  community  as  a 
whole,  which  cause  you  and  all  of  us  much  doubt. 

I make  no  apology,  therefore,  for  discussing  seriously 
several  important  problems.  You  know  from  your  own  busi- 
ness experience  that  many  important  forms  of  the  social  fabric 
are  now  ‘fin  the  melting  pot.”  You  know  that  new  proposals, 
political  and  economic,  are  legion  in  number.  Opinion  gathers 
quickly.  It  gathers  quickly  behind  any  taking  novelty,  and 
conditions  are  such  that  it  spreads  by  some  lateral  absorption 
like  water  in  a lump  of  sugar. 

Industrial  democracy  is  receptive  and  expectant  of  change, 
even  if  only  for  the  sake  of  change.  Currents  of  ambition 
flood  with  Daytonian  ruin  the  old  established  bulwarks  of 
society.  Old  landmarks  are  submerged  by  this  flood.  Rever- 
ence for  the  authority  of  age  and  experience  and  even  of  law 
is  slight.  The  independence  of  a strongly  individualistic  com- 
munity is  feeling  the  pride  of  opinion  and  delights  in  its 
power  without  very  much  thought  of  consequences. 

Representative  government,  the  one  great  product  of 
Anglo-Saxon  civilization,  the  one  great  product  of  the  strug- 
gle for  constitutional  liberty,  seems  to  be  fighting  against  the 
rising  tide  of  the  initiative  and  referendum.  The  return  of 


the  government  to  th.e  people  becomes  synonymous,  perhaps, 
with  the  transformation  from  sobriety  and  reflection  to  hot- 
headed ambition  and  rashness. 

Now,  if  this  rising  tide  has  lifted  our  anchors,  whither 
are  we  drifting?  Are  we  throwing  aside  compass  and  quad- 
rant, and  sailing  towards  unknown  harbors  in  a fog? 

On  all  sides  we  hear  of  social  unrest,  of  socialism,  of 
sabotage,  and  the  Industrial  Workers  of  the  World.  What 
is  going  on?  Is  there  an  internal  fire  eating  out  the  vitals  of 
the  Republic  while  we  are  huddled  like  the  passengers  of  the 
helpless  Volturno  on  th.e  deck  fearing  some  ruinous  cataclysm, 
and  uncertain  whether  there  may  be  any  escape  for  us  or  not? 

Like  practical  men  of  common  sense,  let  us  together  face 
some  of  these  fundamental  problems,  and  allow  me  to  discuss 
them  with  you.  Whether  we  like  it  or  not,  we  must  face  the 
fact  that  large  groups  of  men — and  women,  too — have  found 
in  democracy  an  opportunity  and  occasion  to  give  expression 
to  a raw,  untrained  pride  of  opinion  on  the  most  difficult 
questions  of  government  and  economics.  Respect  for  author- 
ity, for  those  who  have  achieved  something  important,  for 
experience  and  knowledge,  have  seemingly  disappeared.  Crass 
ignorance  reigns  in  the  market  place ; and  that  man  who  loves 
to  plow  his  own  ground  and  bases  his  claim  on  merit,  is  too 
often  lost  in  the  crowd. 

We  have  democracy  growing  rank,  settling  policies  for 
America,  not  according  to  careful  study  and  insight  of  their 
merits,  but  according  to  its  effect  in  catching  votes.  An  un- 
trained, uneducated  constituency,  no  matter  how  honest,  is  the 
paradise  for  a demagogue.  The  confidence  of  conceit  and 
passion  is  generally  in  direct  ratio  to  its  ignorance.  Why 
is  it  that  the  son  today  has  more  assurance  than  the  father? 
“Cheek,”  brazen  effrontery  and  cocksureness  and  unwilling- 
ness to  listen  to  criticism  are  the  mark  of  men  who  guide 
other  men  of  less  force.  These,  then,  I conceive  are  some  of 
the  evident  results  of  democracy;  but  do  you  realize  that  they 
are  as  old  as  Socrates  ? The  same  characteristics  showed  them- 
selves in  Athens.  The  same  things  that  trouble  us  today ; and 
yet  the  world  has  progressed  since  the  time  of  Athens.  Nev- 
ertheless, many  facts  and  opinions  are  changing  shape.  Some 
things  are  certainly  going  by  the  board.  Crews  mutiny  against 

4 


officers;  but  you  have  noticed  that  officers  and  discipline  are 
still  the  rule  of  the  sea.  We  may  have  eruptions  of  ignorance 
and  passion,  but  sooner  or  later  the  shallow  and  the  criminal 
give  way  before  the  inevitable  permanent  facts  of  right  and 
progress. 

Democracy  in  its  old  significance  bore  on  political  rela- 
tions and  equality  of  treatment  by  the  government.  Now,  we 
hear  of  industrial  democracy  and  economic  equality.  That  is, 
there  is  some  assumption  that  not  only  is  one  man’s  vote  as 
good  as  another’s,  but  that  one  man’s  wages  should  be  as 
good  as  another’s.  Right  there,  gentlemen,  is  the  break  with 
logic  and  with  human  nature.  All  men  never  were  born  equal 
in  industrial  capacity.  (Applause.)  In  fact,  the  whole  dis- 
tributive system  of  wages  and  wealth  is  based  on  the  fact  that 
some  men  are  more  efficient  in  productive  industry  than  others. 
A few  years  ago  that  would  have  been  taken  as  axiomatic; 
but  there  is  a further  assumption  connected  with  industrial 
democracy.  It  is  assumed  that  the  existing  system  of  industry 
supplied  by  private  capital  and  managed  by  individuals  is  un- 
just; that  men  are  not  getting  “social”  and  economic  justice; 
that  there  are  men  whose  large  fortunes  must  have  been 
unjustly  accumulated.  Consequently  we  are  made  aware  that 
when  laborers  in  any  field  having  formerly  received,  say,  three 
dollars  a day  have  by  virtue  of  strikes  and  struggles  got  five 
dollars  or  six  dollars  a day,  and  possibly  for  a less  number 
of  hours  in  a day,  they  are  not  satisfied.  They  have  no  inten- 
tion of  stopping  the  campaign  for  higher  wages.  If  they  have 
already  doubled  their  wages,  why  not  set  to  work  and  double 
them  again?  If  they  have  gained  five  dollars  a day  in  the 
course  of  the  last  few  decades,  why  should  they  not  keep  on 
until  they  get  fifty  dollars  a day?  What  is  to  prevent  that 
consummation  ? 

Gentlemen,  these  are  facts  and  conditions  that  we  must 
face.  As  long  as  employers  have  palatial  homes,  fine  horses 
and  automobiles,  and  dine  at  tables  of  Levi,  why  should  they 
not  keep  on  demanding?  In  fact,  industrial  democracy  assumes 
that  wealth  is  unjustly  distributed,  and  its  avowed  end  is  a 
new  and  different  distribution  of  wealth,  which  those  with 
capital  invested  in  their  business  must  face.  It  is  a purpose 
of  growing  numbers  in  our  community;  and  these  increasing 

5 


numbers  having  votes  expect  to  use  the  state  and  national 
legislation  to  aid  in  forcing  their  system  on  society.  Those 
who  seek  high  office  and  wish  to  secure  these  votes,  are  clev- 
erly bidding  for  followers  under  the  standard  of  “social  jus- 
tice.” They  have  trimmed  th.eir  sails  to  catch  that  particular 
slant  of  wind  to  gain  their  object. 

The  reason  that  some  men  are  rich  and  some  are  poor 
has  nothing  to  do  with  their  goodness.  A good  man  may  be 
stupid,  or  he  may  have  an  artistic  temperament  without  any 
practical  business  sense;  while  another  man  just  as  honest  may 
have  foresight,  good  judgment,  a cool  head,  executive  ability 
and  great  business  capacity.  The  former  is  likely  to  remain 
poor  while  the  latter  may  amass  a large  fortune.  The  former 
may  be  a great  artist  and  on  the  side  of  culture  he  may  be  a 
more  valuable  member  of  society  than  the  latter.  It  all  de- 
pends on  how  we  look  regarding  the  accumulation  of  wealth. 
Many  have  gained  wealth  who  have  done  nothing  for  the  well 
being  of  others  in  society.  Now,  without  attempting  to  grade 
th.e  pursuits  of  men  we  are  compelled  to  face  certain  prac- 
tical problems.  It  is  purely  a material  question.  It  concern’s 
a man’s  capacity  to  get  material  rewards.  To  some  people — 
fortunately  not  all — that  is  the  sole  aim.  And  let  it  be  ob- 
served here  in  passing  that  socialism  is  a purely  material  phi- 
losophy. Its  objective  is  to  overturn  an  existing  privately 
owned  industry  in  order  to  attain  for  the  workers  more  ma- 
terial wealth  to  consume.  They  may  not  get  it;  but  that  is 
their  aim.  It  is  not,  mark  you,  th.eir  aim  to  establish  goodness. 
By  having  more  to  spend  possibly  they  may  expect  to  grow 
in  grace. 

By  unthinking  persons  all  discriminations  are  thrown  to 
the  wind.  If  there  is  one  rich  man  who  is  evil,  all  rich  men 
are  evil.  Without  any  careful  examination  and  analysis,  it 
is  assumed  that  if  a man  is  rich,  it  could  only  be  because  he 
got  rich  at  the  expense  of  others,  and  especially  of  his  laborers. 
Hence  the  theory  already  alluded  to  that  workmen  are  right 
in  pressing  for  higher  wages  until  all  are  equally  rich.  That 
is,  in  a nutshell,  the  hope,  the  underlying  hope  of  industrial 
democracy. 

Now  let  us  face  that  assumption,  let  us  be  practical.  “All 
the  fools  are  not  dead  yet,”  it  is  true;  but  it  is  equally  true 

6 


that  th.e  saving  grace  of  common  sense  is  still  a characteristic 
of  the  American  people.  Let  me  give  you  a concrete  case 
which  I am  personally  cognizant  of,  which,  after  all,  is  only 
typical  of  a legion  of  other  cases.  One  of  the  cowboys  on 
a southwestern  ranch  was  a quiet,  silent  fellow  of  eighteen. 
He  rode  well  and  knew  the  nature  of  a cow,  and  that  is  a 
good  deal.  If  they  played  a joke  on  him  he  took  it  good 
naturedly  and  said  nothing.  At  the  end  of  the  month  the 
bunch  of  boys  went  into  town  and  “blew  in”  their  month’s 
wages  in  the  saloons.  Our  young  man  in  this  case  in  a lone- 
some sort  of  way  stayed  on  the  ranch.  He  took  of  course 
the  usual  jibes  of  the  other  fellows  when  they  came  back, 
grinned  and  said  nothing.  He  was  fed  and  found  on  the 
ranch,  and  at  the  end  of  the  year  he  had  $360  to  his  credit. 
That  went  on  for  three  or  four  years.  Suddenly  he  was 
known  to  have  preempted  160  acres  of  the  best  land  in  that 
region.  He  built  his  shack  and  stocked  his  farm  with  his 
savings.  He  was  a good  judge  of  horses  and  cattle  and  he 
worked  indefatigably  on  that  new  farm,  which  was,  in  the 
words  of  the  old  adage,  truly  his  savings  bank.  In  one  year 
h.is  wheat  sold  for  $3,500  and  his  stand  of  alfalfa  was  as 
good  as  that  of  anyone  else  in  the  whole  region.  He  needed 
more  help  and  he  employed  some  of  the  old  boys  he  had 
known  on  the  ranch,  and  he  paid  them  more  than  they  had 
been  paid  in  the  saddle.  Then,  after  having  paid  for  his  farm, 
he  soon  had  enough  to  buy  the  adjoining  farm  of  160  acres 
for  cash..  He  had  a rapidly  increasing  herd  on  the  open  range. 
There  was  then  an  open  range.  In  a very  few  years  he  be- 
came the  owner  of  1,200  acres  of  alfalfa  in  Texas,  quite  apart 
from  his  other  farms  and  herds.  His  income  at  one  time 
some  years  ago  I knew  was  over  $10,000  per  annum.  That 
he  invested  in  more  land,  he  bought  bank  stock  and  he  helped 
build  railroads  through  the  southwest  and  in  very  recent  years 
he  was  popularly  known  as  a millionaire. 

Now,  did  this  man  gain  his  fortune  at  the  expense  of 
others,  I ask  you?  Any  other  one  of  those  mad  riding,  reck- 
less, frivolous  cowboys  could  have  done  the  same  of  they  had 
had  the  same  qualities  which  industrial  success  demands.  There 
was  the  rub.  Industrial  success,  gentlemen,  is  personal,  not 
social.  (Applause.)  Society  today  or  yesterday  is  not,  and 

7 


has  not  been,  holding  any  man  at  the  bottom.  It  is  the  personal 
deficiencies  of  the  man  that  are  holding  him  there. 

Industrial  success  can  always  be  won  at  a price,  and  that 
price  is  an  observance  of  the  inevitable  rules  of  the  game, 
namely,  sobriety,  industry,  saving,  avoidance  of  speculation, 
knowledge  of  human  nature,  good  judgment,  common  sense, 
persistence,  intelligence  and  integrity.  (Applause.)  No  social 
system  ever  kept  down  a man  who  had  those  qualities.  Now, 
after  all  this  talk  about  unrest,  isn’t  it  about  time  that  the 
world  found  out  that  industrial  success  can  be  won  only  by 
the  possessor  of  these  qualities?  Isn’t  it  worth  while  to  have 
the  practical  operation  of  life  in  this  world  forced  upon  us 
as  it  exists  if  we  want  to  win  success?  Is  it  “social  justice” 
then  to  proclaim  to  the  frivolous  or  the  careless  that  the  social 
system  is  responsible  for  their  scanty  means,  and  that  they 
should  claim  a share  in  th.e  wealth  of  our  rich  and  successful 
cowboy?  They  say  he  should  be  made  to  divide.  The  cry  is 
on  with  “social  justice”  and  down  with  the  plutocrat! 

Now  I hear  someone  say,  possibly,  these  conclusions  are 
very  obvious ; but  how  about  the  great  “malefactors  of 
wealth?”  In  the  first  place,  size  is  no  crime.  If  a business 
legitimately  carried  on  becomes  very  large,  that  is  a mark  of 
success,  and  a mark  of  phenomenal  opportunities  of  a new 
country  abounding  in  great  natural  resources  and  inhabited  by 
a rapidly  growing  population.  Great  fortunes  honestly  won 
are  just  as  possible  as  small  fortunes  honestly  won.  If  I had 
time  I should  like  to  describe  more  fully  certain  typical  for- 
tunes. I will  only  briefly  refer  to  a few. 

You  no  doubt  have  heard  of  the  Baron  Hirsch  Founda- 
tion which  has  assisted  so  many  of  the  poor  of  the  Hebrew 
race.  Baron  Hirsch  made  an  enormous  fortune  by  his  success 
in  introducing  means  of  transportation  in  the  southeastern 
part  of  Europe  in  the  region  covered  by  the  activities  of  the 
recent  Balkan  War.  Before  he  did  anything,  before  he  put  at 
stake  all  his  capital,  all  the  funds  that  he  could  accumulate, 
in  transportation  in  that  region,  those  people  lived  a primi- 
tive, uncultured,  unsatisfied  life.  The  means  of  existence  were 
scanty.  They  had  little  of  the  conveniences  of  society.  He 
carried  railways  and  transportation  into  the  remotest  part  of 
those  regions  around  the  Danube;  provided  a market  for  the 

8 


products  of  many  of  those  countries ; caused  an  impetus  to 
production;  and  enormously  increased  the  productive  capacity 
of  those  countries  by  carrying  their  products  to  markets  at 
small  tolls  for  transportation.  He  accumulated  an  enormous 
fortune  and  yet  he  practically  civilized  them  (if  you  can  speak 
of  civilization  in  countries  where  such  a war  has  taken  place) 
by  obtaining  markets  for  the  products  of  that  great  region. 
That  has  enriched  it  by  hundreds  of  millions  of  dollars,  taking 
the  country  as  a whole,  and  for  which  he  recieved  only  a frac- 
tion of  those  large  gains. 

Take  the  case  of  George  Peabody.  George  Peabody  was 
a youth  who  marched  out  of  the  little  village  of  Danvers  as  a 
poor  boy.  He  went  into  business,  and  in  a highly  honorable 
and  characterful  way  accumulated  a large  fortune.  When  he 
died  that  fortune  was  left  to  the  Peabody  Foundations,  which 
have  done  so  much  to  build  up  education  in  the  earlier  decades 
among  the  negroes  of  the  South.  Here  and  there  and  every- 
where there  are  large  Peabody  foundations.  Not  only  was 
there  a fortune  honestly  made,  but  it  was  honestly  spent. 

Let  me  illustrate — and  I will  not  bore  you  by  too  many 
cases — let  me  illustrate  by  another  fortune.  When  Howe  in- 
vented the  sewing  machine,  he  invented  a labor-saving  device 
for  society.  The  enormous  saving  of  production  made  possible 
by  the  sewing  machine  allowed  hundreds  of  millions  to  be 
created  that  would  not  have  been  created  without  it.  The  small 
fortune  that  came  to  Howe  and  the  early  manufacturers  of 
the  sewing  machine  were  but  a fraction  of  the  enormous  ben- 
efits that  were  conferred  upon  society  by  that  sort  of  a device. 

Let  me  take  one  other  case,  that  of  J.  J.  Hill.  J.  J.  Hill 
was  a Canadian  who  came  to  this  country  without  any  funds. 
He  began  life  on  the  upper  Mississippi  as  a stevedore  unload- 
ing freight  from  steamers ; almost  immediately  his  qualities 
showed  in  his  being  put  at  the  head  of  a gang.  He  had  the 
quality  of  leadership.  Very  soon  he  mastered  in  his  own  mind 
the  whole  problem  of  freight  transportation  in  that  country. 
Light  across  to  the  west,  in  order  to  get  from  the  Mississippi 
to  the  Red  River  of  the  North,  there  was  a point  where  freight 
was  loaded  upon  steamers  to  be  carried  to  the  north ; and 


9 


there  was  a sort  of  inefficient,  unfinished  railroad  whose  bonds 
were  in  the  hands  of  Holland  bondholders. 

He  got  over  there  on  the  Red  River  and  began  to  run 
competition  with  another  owner  of  a steamer  up  that  river. 
Next  they  united.  Then  he  and  his  friends  got  hold  of  that 
railroad  and  paid  the  price  that  the  bondholders  were  willing 
to  sell  their  bonds  for.  Then  he  began  to  see  it  was  more  de- 
sirable to  run  his  railroad  north  and  south  through  the  length 
of  the  fertile  valley  than  to  run  it  across  the  different  valleys 
which  stretched  to  the  west.  He  began  to  build  out  of  the 
earnings  of  his  railroad  certain  sections.  That  was  in  the  last 
of  the  ’70s  and  the  early  years  of  the  ’80s.  He  put  a low  tariff 
on  carrying  farmers’  supplies  and  material  and  household  ef- 
fects into  the  interior,  and  charged  the  ordinary  normal  price 
for  the  carrying  out  of  their  products.  The  result  was  that  they 
rapidly  populated  the  valleys  as  they  built  northward,  and  after 
they  had  paid  for  that  section,  they  built  another  section,  until 
the  time  came  when  they  had  built  up  an  enormously  profit- 
able transportation  machine  without  having  capitalized  it  with 
one  cent  of  bonds.  Now  I think  anyone  who  investigates  that 
case — I am  speaking  now  of  the  early  formation  of  that  sys- 
tem. I am  not  cognizant  of  the  details  of  its  present  manage- 
ment— must  know  that  it  was  perfectly  possible  and  legitimate 
even  in  railway  finance  to  plan,  to  build  and  to  organize  an 
effective  transportation  system,  aiding  and  assisting  the  com- 
munity in  which  it  existed,  without  taking  one  cent  away  from 
the  others. 

I give  you  those  cases  as  an  illustration.  But  someone 
says;  “Yes;  but  look  at  the  big  rascals  in  high  finance.”  Now 
let  us  face  that  point  directly. 

It  seems  to  me  that  here  is  the  place  now  to  insist  upon 
a very  significant  distinction.  Robbery,  cheating,  stealing,  false- 
hood, dishonesty,  are  today  under  the  ban  of  the  law.  The 
laws  of  the  land  are  intended  to  convict  any  perpetrators  of 
these  wrongs.  If  there  is  a breach,  we  are  all  agreed  that  we 
should  insist  on  the  enforcement  of  the  law;  but  on  the  other 
hand,  if  I am  poor  and  B is  very  rich,  am  I justified  in  declar- 
ing that  B is  thereby  a malefactor  of  great  wealth?  That 
assumes  the  economic  proposition  that  no  man  could  become 
very  rich  except  at  the  expense  of  others,  or  by  unfair  meth- 

10 


ods  of  procedure.  That  proposition  cannot  be  admitted  for  a 
moment. 

We  may  readily  admit  that  some  men  may  have  become 
rich  by  rascality,  by  cheating  others,  and  by  different  devices 
for  esccaping  the  letter  of  the  law,  which  are  dishonest  and 
unmoral ; but  it  is  stupid  to  say  that  that  is  true  of  every 
rich  man. 

It  is  a mark  of  the  untrained  mind  that  it  can  make  no 
distinctions.  We  are  living  today  in  such,  an  hysterical  age 
that  no  discriminating  judgment  seems  to  be  popular.  So  I 
say  the  business  world  must  face  the  fact  that  half-baked 
teachings  of  demagogues,  and  appeals  to  prejudice,  have  made 
the  masses  of  the  people  believe  today  that  if  a man  is  very 
rich,  he  is  necessarily  a bad  man,  who  has  gained  riches  at 
the  expense  of  others. 

It  is  assumed,  therefore,  that  no  man  ought  to  accumulate 
more  than  a certain  amount,  and  in  one  of  the  pieces  of  legis- 
lation proposed  in  the  United  States  Senate,  I personally  heard 
myself  the  originator  of  that  law  insist  that  there  should  be  a 
limit  placed  upon  the  amount  of  wealth  that  any  man  could 
accumulate. 

What  is  the  corollary?  There  follows  the  corollary  that 
the  masses  of  voters  being  poor,  should  force  the  rich  by  pro- 
gressive taxes  to  pay  a greater  proportion  of  the  expense  of 
government.  Such  a policy  has  no  economic  basis.  It  is  one 
of  the  developments  of  industrial  democracy.  A counting  of 
noses  settles  that  question,  not  a counting  of  economic  argu- 
ments. As  soon  as  economic  questions  then  are  settled,  not 
by  expert  advice,  but  by  universal  suffrage  and  a counting  of 
noses,  there  is  no  help  for  the  business  world  but  the  educa- 
tion of  the  voter. 

The  quality  of  political  democracy  is,  as  I have  said,  by 
facile  logic  easily  transferred  over  to  industrial  democracy; 
but  those  two  realms  of  human  action  are  founded  on  rad- 
ically different  basis  and  conditions.  What  is  true  of  the  one 
is  not  true  of  the  other.  All  men  have  or  should  have  equal 
rights  before  the  law.  Each  should  have  equal  protection  to 
life  and  property.  But  if  A is  sober  and  thrifty,  and  saves 
up  $10,000,  and  if  B is  never  sober  and  perhaps  owns  only 
his  horse,  then  the  state  owes  A the  same  protection  over  his 

11 


$10,000  that  it  owes  to  B over  his  horse ; and  the  principle  is 
the  same  whether  A has  $10,000  or  $100,000,000,  provided — 
note  that  proviso — provided  he  does  not  violate  the  rights  of 
others. 

In  industrial  democracy  B has  no  more  righ.t  over  A’s 
$10,000  than  he  has  over  my  overcoat.  (Applause.)  Unless 
that  is  founded  in  adamant  and  fought  for,  what  protection 
’has  B for  his  horse  against  the  influential  rich  man?  (Ap- 
plause.) The  middle  ages  is  the  answer  to  that.  That  was  the 
situation  in  the  middle  ages.  The  poor  man  had  no  protection. 
We  have  developed  out  of  that.  Are  we  going  back  to  it? 

Industrial  democracy  practically  opposes  this  system  of 
property  and  this  theory  of  justice.  It  is  sometimes  forgotten 
that  the  development  of  individual  private  property  since  about 
600  A.  D.  has  been  a large  and  important  part  of  the  growth 
cf  civil  liberty  and  the  freedom  and  equality  of  the  individual. 
It  was  not  forced  on  the  race  by  any  great  conqueror.  Like  all 
permanent  laws  and  institutions,  it  is  the  expression  of  the 
wishes  and  desires  of  the  race.  Our  rights  in  property  today 
are  what  they  are  because  the  race  is  what  it  is. 

Now  comes  socialism  in  all  its  various  forms,  and  proposes 
to  put  the  control  of  capital  and  industry  in  the  hands  of  the 
state.  If  in  open  competition  of  man  with  man  in  business, 
B is  surpassed  by  A,  B seems  to  accept  his  failure,  but  asks 
the  state  to  make  A share  in  the  results  of  his  skill  with  B. 
That  is  the  essence  of  socialism ; it  is  the  philosophy  of  failure. 
It.  is  not  likely  to  succeed  in  the  ultimate  end,  but  it  is  color- 
ing industrial  democracy  through  and  through  in  many  minor 
ways.  Its  practical  form  today  is  governmental  interference 
with  industry  in  the  cases  of  public  utilities;  and  many  times 
there  is  a reason  for  that  sort  of  interference ; but  it  is  not 
the  socialistic  point;  and  government  supervision  has  come  to 
stay.  Yet  by  standing  on  the  rock  of  social  and  religious  lib- 
erty we  must  fight  every  attempt  to  restrict  the  freedom  of 
initiative  and  industrial  life ; provided  that  it  does  not  infringe 
upon  the  rights  of  others.  (Applause.) 

There  is  today  a nebulous  area  in  human  activities  in 
which  legislation  and  courts  are  being  urged  to  interfere  with 
capital  on  the  ground  that  the  state  knows  better  than  the 
indivdual  what  is  good  for  it ; that  you  can  make  men  better 

12 


by  legislation,  and  prevent  ‘'social  power”  from  running  to 
waste.  On  the  other  hand,  while  carefully  restricting  the  indi- 
vidual from  any  act  which  may  prejudice  or  injure  another, 
let  that  individual  feel  that  what  he  gets  must  be  the  result 
of  his  own  force  and  his  own  ability,  and  then  we  shall  be 
putting  the  only  real  stimulus  we  have  behind  the  character 
and  efficiency  of  every  worker  in  the  industrial  world,  high, 
or  low. 

There  is  one  other  point  I should  like  to  present.  This 
vague  area  in  which  increased  action  by  the  state  is  urged,  is 
a paradise  for  dreamers,  sentimentalists  and  revolutionists.  If 
I am  not  mistaken,  one  of  the  side  shows  of  industrial  democ- 
racy is  the  “return  of  the  government  to  the  people.”  If  any 
wrong  is  being  done  and  the  law  is  silent,  then  the  sooner  a 
law  is  made  to  meet  the  situation,  the  better.  We  are  alj  agreed 
upon  that.  However,  the  face  of  the  business  world  is  chang- 
ing. New  methods  of  doing  business  are  superseding  old  ones. 
Centers  of  trade  are  shifting,  distances  are  increasing,  inter- 
national relations  affect  our  daily  transactions.  The  regulation 
of  the  rights  of  individuals  in  these  new  relations  is  a very 
delicate  and  a very  serious  matter.  For  instance,  the  develop- 
ment of  irrigation  and  water  power  has  forced  the  creation 
of  a new  body  of  law.  Also  the  very  form  of  our  government, 
with  state  and  federal  laws  applying  over  the  same  territory, 
raises  a whole  series  of  new  problems  as  to  interstate  com- 
merce and  the  regulation  of  monopoly.  And  these  new  prob- 
lems are  legion.  They  are  at  once  new  and  difficult.  Now 
with  the  history  of  the  growth  of  civil  liberty  behind  us,  and 
with  the  experience  of  centuries  to  warn  us,  to  what  kind  of 
persons  and  in  what  way  should  we  entrust  the  solution  of 
these  problems? 

The  finest  flower  of  Anglo-Saxon  civilization,  as  I said, 
its  gift  to  the  rest  of  the  world,  is  representative  government. 
What  is  implied  in  that?  Simply  that  difficult  matters  of  law- 
making should  not  be  left  to  the  untrained  body  of  all  citizens, 
but  that  the  whole  body  should  freely  pick  out  the  best  trained, 
best  qualified,  and  tell  them  to  devote  their  whole  time  to  this 
expert  service ; since  the  average  citizen  busy  at  his  industry 
has  no  time  or  capacity  for  specialized  study. 

That,  gentlemen,  is  practical,  intelligent  government  for 

13 


the  people  and  by  the  people.  It  is  the  application  of  the  old 
doctrine  of  a proper  division  of  labor. 

Now,  on  what  ground  is  it  advisable  to  take  away  the 
initiative  in  legislation  from  representatives  of  all  the  peo- 
ple, and  refer  it  to  the  people  themselves?  On  the  ground 
that  representatives  do  not  represent?  Then  what  is  the 
difficulty  in  selecting  those  who  do?  If  we  say  that  the 
whole  body  of  voters  cannot  do  this,  then,  mark  you,  we  are 
effectively  indicting  the  intelligence  and  motives  of  the  gen- 
eral body  of  voters ; and  if  you  accept  that,  then  they  are  cer- 
tainly unfit  to  pass  on  legislation  which  requires  specialized 
expertness.  To  my  mind  there  is  no  satisfactory  answer  to 
that  argument.  Obviously  the  remedy  for  poor  legislation  is 
greater  alertness  and  responsibility  in  choosing  our  represent- 
atives. The  remedy  is  there.  That  in  my  judgment  is  the  pith 
of  the  whole  matter  that  is  raised  by  the  initiative  and  refer- 
endum. 

Now,  popular  voting  on  technical  questions  of  money, 
banking,  labor,  price  regulation  and  monopolies  is  the  height 
of  absurdity.  If  you  have  an  attack  of  appendicitis  you  do 
not  call  in  the  first  stranger  you  meet  on  the  street.  Why 
don’t  we  get  experts  in  legislation  affecting  industry  as  well 
as  in  surgery?  We  are  most  truly  returning  the  government 
to  the  people  when  we  are  placing  the  government  in  the  hands 
of  honest  and  intelligent  representatives,  and  taking  it  away 
from  the  bigot  and  the  ignorant. 

Gentlemen,  I have  probably  talked  to  you  longer  than  you 
care  to  hear,  but  I have  tried  in  the  brief  time  to  touch  upon 
some  of  the  salient  characteristics  of  the  recent  thinking  known 
as  industrial  democracy.  Whither  are  we  drifting?  What  is 
the  meaning  to  business  of  this  so-called  “new  thought?”  By 
business,  of  course,  I mean  legitimate  business,  thoughtful  and 
honestly  carried  on.  It  is  obvious  that  business  in  this  sense 
is  threatened  with  very  serious  misconceptions  and  with  wide- 
spread delusions  that  have  no  economic  justification.  It  is  not 
to  the  point  to  say  that  these  are  illogical  and  must  be  mis- 
taken. Saying  so  does  not  change  the  facts.  Fantastic  pro- 
posals affecting  your  business  are  being  urged  upon  legisla- 
tors in  order  to  give  the  effect  of  law  to  some  passing  wave 
of  sentiment;  and  you  must  remember,  too,  that  a very  large 

14 


part  of  these  proposals  come  from  enthusiastic  and  entirely 
honest  radicals.  Attacks  are  being  made  on  established  insti- 
tutions; nothing  is  taken  for  granted;  and  the  justification  for 
established  institutions  has  got  to  be  given  anew.  In  short, 
we  can  hold  to  the  forms  of  constitutional  government  only 
by  fighting  for  them. 

Democracy  gives  an  open  forum  for  all  kinds  of  opinion 
from  conservatism  to  radicalism  and  even  worse ; and  that  is 
as  it  should  be.  If  established  institutions  are  the  best,  they 
will  survive  without  question;  but  we  are  undoubtedly  in  for 
a hot  debate  on  fundamentals.  For  one,  I welcome  that  dis- 
cussion, for  after  full  and  free  discussion  the  American  people 
have  never  gone  far  wrong.  A state  is  dead  that  cannot  bear 
free  discussion;  but  the  situation  calls  for  serious  and  alert 
action  to  watch  that  the  rights  of  legitimate  business  are  well 
defended  and  not  weakened.  Attacks  are  not  to  be  regarded  as 
a basis  for  discouragement,  but  rather  as  a stimulus  for  virile 
thinking  and  activity.  A dead  fish  can  float  down  stream,  but 
only  a live  fish  can  swim  up  stream. 

There  is  no  disguising  the  fact  of  a tendency  in  modern 
industrial  democracy  to  an  exaggerated  doctrine  of  equality. 
By  that  I mean  a tendency  to  regard  all  men  as  having  a right 
to  an  equal  share  of  wealth,  independent  of  the  God-given  dif- 
ferences of  mind  and  body.  Dissatisfaction  with  existing 
shares  as  now  distributed  is  general,  and  few  there  are  who 
are  trained  to  explain  why  rewards  are  what  they  are  today. 
If  dissatisfaction  is  general,  if  economic  honesty  and  training 
are  rare,  you  have  an  inevitable  field  for  agitation.  It  would 
be  strange  if  you  did  not  have  it.  Educating  the  public  in 
intelligence,  however,  is  the  obvious  remedy ; but  such  a spread 
of  education  in  economics  is  a very  slow  process.  Meanwhile, 
gusts  of  public  opinion,  no  matter  how  wrong,  are  certain  to 
arise.  The  kind  of  legislators  we  have  are  likely  to  respond 
to  public  opinion  in  order  to  retain  office. 

As  to  the  final  result,  there  cannot  be  any  doubt.  The 
light-headed  agitator  and  his  party,  buoyed  up  by  the  inflated 
gas  of  passion,  may  have  a brief  day  of  triumph,  a brief  swing 
of  glory  in  the  sky,  but  it  is  sure  to  be  followed  by  a destruc- 
tive fall  to  cold  facts.  In  the  process  of  educating  the  public, 
both  conservatives  and  radicals  are  going  to  suffer;  but  the 

15 


Dll 2 061884661 


whole  history  of  the  race  shows  that  the  true  wisdom  of  com- 
mon sense  lying  in  between  the  extremes  of  both  sides  is  cer- 
tain to  return,  and  then  extremes  will  be  diminished  only  to 
the  extent  of  the  education  of  the  public. 

Now  let  me  say  one  final  word.  As  a general  rule  I think 
I am  correct  in  saying  that  all  of  us  wish  to  further  equality 
in  industry  in  the  sense  that  those  of  equal  capacity  should 
have  as  nearly  as  possible  equal  rewards.  In  the  actual  whirl 
of  the  operation  of  daily  business,  that  will  not  always  be  so. 
It  may  be  well  for  all  our  business  men  to  see  that  there  is  no 
cause  of  complaint  on  this  score  on  the  ground  of  a desire 
to  profit  at  the  expense  of  another  human  being. 

There  are  generally  two  sides  to  every  grievance,  and  the 
rich  -and  successful  owe  a moral  obligation  to  the  poor  and 
unsuccessful  to  give  them  a hearing  and  aid  them,  even  though 
they  may  be  sometimes  bitter  and  unreasonable.  Phillips 
Brooks  once  said:  “A  man  does  not  have  a right  to  all  his 
rights and  a kindly  and  intelligent  employer  can  do  very 
much  to  help  his  working  people,  to  regard  them  not  as  ma- 
chines made  to  earn  a profit  for  him;  but  to  regard  them  as 
human  beings  whom  he  would  like  to  see  obtain  greater  com- 
fort and  more  happiness.  If  those  things  can  be  tactfully  com- 
prehended and  accepted,  radicalism  and  its  extremes  must  give 
place  before  the  wisdom  that  lies  between  the  two  extremes  of 
thought  and  action;  and  it  lies  in  the  hands  of  you  gentlemen 
to  ameliorate  the  struggle  and  avoid  damage.  It  is  an  old 
saying  that  what  a lion  eats  becomes  lion,  and  if  you  introduce 
into  the  industrial  struggle  a fine  feeling  of  sympathy  and 
interest,  you  are  sure  to  generate  the  same  and  get  the  like  in 
return.  (Applause.) 


16 


